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Merck Doubles Lycera Bet to $600M+

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Lycera said today it could reap another $300 million-plus through the expansion of a two-year-old collaboration with Merck & Co.—all but doubling its original potential proceeds from the partnership—now that the companies agreed to broaden its purpose into developing and commercializing small molecule therapies directed at new targets for a range of immune-mediated disorders.

The expansion would all-but-double the up-to-$307 million that Lycera stood to gain under its original collaboration with Merck. That effort was focused on developing small molecule therapies targeting the retinoic acid-related orphan receptor (RORγt), the key transcription factor that orchestrates the differentiation of T-helper 17 (Th17) cells, which produce interleukin-17 (IL-17). By mediating IL-17, Lycera and Merck aimed to develop a new class of drug candidates capable of treating major autoimmune diseases—including inflammatory bowel disease, multiple sclerosis, psoriasis, and rheumatoid arthritis (RA).

“There are substantial unmet medical needs and opportunities in autoimmune disorders, and new targets representing attractive opportunities that we are very pleased to pursue through our new collaboration with Lycera,” Rupert Vessey, D.Phil., FRCP, senior vp, global scientific strategy with Merck Research Laboratories, said in a statement.

Lycera said it would receive from Merck an up-front payment and research funding, both undisclosed. Lycera would also be eligible for “in excess of $300 million” in research, development, regulatory, and commercial milestone payments.

Under the original agreement, Merck agreed to pay Lycera $12 million up-front cash, “significant” committed research funding, and up to $295 million in research, development and regulatory milestone payments tied to approval of “multiple major indications.”

As with the original collaboration, Lycera agreed to grant Merck clinical development responsibility, as well as worldwide marketing and commercialization rights, for any products that may be developed as a result of the collaboration. And as with the original accord, Lycera will receive royalty payments, as well as development and sales milestones, on global sales from any products from the collaboration.

However, the companies this time disclosed fewer specifics; the 2011 announcement quantified Lycera’s potential royalties as “up to low double-digit tiered” royalty payments. Also, today’s announcement did not include a provision of the original collaboration disclosed by the companies in 2011: A profit share option in the U.S. retained by Lycera to all products resulting from the collaboration.

In doubling its bet on Lycera, Merck is counting on the collaboration to help address its struggle in recent years to rebuild its drug pipeline. As of November 1, Merck’s autoimmune pipeline drug candidates include three candidates, but all are in Phase II: The anti-interleukin-23 (IL-23) monoclonal antibody MK-3222, a psoriasis drug, and two candidates about which Merck has said little: the allergy/immunotherapy drug MK-8237, for which Merck holds only North American rights, and the RA drug, MK-8457.

Merck’s need to boost its pipeline has intensified as patent protection ended for blockbusters like asthma drug Singulair (in August) and blood pressure medications Cozaar/Hyzaar (in 2010), and the company has endured numerous clinical trial setbacks. Earlier this month, Merck disclosed it would delay seeking approval until next year for osteoporosis drug candidate odanacatib, which some analysts predicted last year could generate up to $3 billion in sales.

Odanacatib is the company’s second clinical setback in as many months. In January, Merck said it would not pursue FDA approval for the cholesterol drug candidate Tredaptive after it failed a late-stage clinical trial. Tredaptive showed an increase in nonfatal side effects, and did not significantly reduce the risk of coronary deaths, nonfatal heart attacks, and strokes.

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